Live Music Business To Do As Well As Airline Business

This may be a bad time to try and stir up sympathy for concert-promoting behemoth Live Nation, what with its impending merger with Tickemtaster and Congressional hearings and all, but if ever there was a way to do it, well, this would be it: Suggest that it could stand to take some tips from the airline industry, which was, prior to the executives of car companies taking their private jets to Washington to ask for a bailout, generally regarded as the worst-run business in America. Still, this article in Billboard at least does a good job of explaining the complex intricacies of pricing seats at concerts. There are a lot of competing needs when setting ticket prices—the need to sell out the venue, the need to keep the fans happy, and nthe eed to make as much money from the ticket sales as possible. The best way to do the first and the third things, economically speaking, is called “yield management,” or allowing the price of a given ticket to fluctuate based on demand. The problem is that, as the airlines have learned, this practice tends to make customers unhappy.

In theory, there’s no good reason why concert tickets couldn’t be priced variably over time, and since “secondary market” sites like StubHub, Craigslist, and eBay show that people are willing to pay more than face value for some seats depending on where and when an event is, there’s no reason that bands shouldn’t be seeing their cut of that money. But bands aren’t cities, and that’s the problem. Here’s how it breaks down:

• It is in the interest of a promoter to completely sell out a venue, since the promoter makes its money on things like parking, concessions, and merch—the more people, the more money from non-ticket sales.
• It is in the interests of both an artist and a promoter to make as much money as possible from the tickets, since the band makes their money off gross receipts, not number of tickets sold, and in any event the promoter has to at least make the guarantee for the band, so number of tickets matters less than the amount each ticket is sold for.
• It is in the interest of fans to get the best possible seat for the lowest possible price.

You can see how this all might not work together. From the promoter’s perspective, if a ticket is selling for $800 on StubHub, then the face value of that ticket should have been $800 in the first place. But since music is ostensibly a populist medium, fans will get mightily pissed off if they think they’re being forced to pay $800 to see a band. (Even though they’re only being forced to pay $800 to get very close to the band.) So the artists nix that idea. But without setting market-level prices on the top end, cutting prices for unsold tickets at the bottom end (selling nosebleed seats for Fugazi-level prices two days before the show, say) leaves money on the table, although at the same time that makes fans happy and sells more beers.

As problematic as this all is, though, it’s worth remembering the fact that the airlines, as a business, are almost universally despised, whereas concerts still enjoy a semi-positive reputation. This matters because when you have to travel somewhere far, you have to fly, but you never have to see a concert. The audience’s desire to see the Rolling Stones play songs they wrote 30 years ago rests almost entirely on a feeling of goodwill, that they’re not cattle assigned by a computer to a tiny airplane seat, but people who the band wants to please. $800 seats do not seem like a pleasing act. Money may be left on the table, but it almost seems like whatever mild respect the industry has for fans has been a saving grace.

Ticketonomics [Billboard]